Petition Write off income tax liability for prior year if moved to current year basis.
Around two-thirds of taxpayers currently pay their tax for the previous year in the current year. When this amendment was made in Guernsey the prior year tax was written off. This petition requests both the move to current year basis and that the tax liability for the prior year be written off.
The Government is seeking to move to current year basis whilst still holding taxpayers liable for what they owe for the previous year – in effect doubling their tax liability. Those with a £21,000 tax bill would be charged an additional £350 per month for 5 years (£4,200). Their earnings needed to cover this payment would itself be taxed during the current year at 20% (so you would need to earn £5,250).With many people struggling under the current pandemic the Government proposal is unjust.
The States Assembly will consider this for a debate
The States Assembly considers all petitions that get more than 5,000 signatures for a debate
Waiting for 42 days for a debate date
This response was given on 26 August 2020
The Minister for Treasury and Resources does not support this petition and has made it clear that the Government is not in a position to write off the tax liability for 2019.
Moving taxpayers who currently pay their tax a year in arrears – or Prior Year Basis (PYB) – onto the Current Year Basis (CYB) has been discussed for a number of years. The Government Plan 2020-2023 committed the Government to look at options for all taxpayers (apart from companies) to be moved to CYB for paying tax. This would mean all taxpayers would pay tax on their income in the year that they earned it.
The Minister for Treasury and Resources asked for this work to be accelerated so that the Government might be able to provide some extra financial relief to many Islanders when it is needed most. The proposed change is part of the Fiscal Stimulus package that was announced in early July and could leave around £18 million in the pockets of PYB taxpayers.
This PYB reform proposal would affect around 45,000 people who currently pay their tax in arrears.
The proposal, to be debated in the States Assembly in this autumn, would move all PYB taxpayers onto a CYB for paying tax. Their tax payments in 2020, which have been going towards their 2019 tax bill, would be moved at the end of this year to pay their 2020 tax liability. It is proposed that the payment of their 2019 tax bill would be frozen until January 2023.
PYB taxpayers would not be expected to pay their 2019 tax bill in full in 2023, unless they choose to do so. Options to pay the 2019 tax liability over a period of time, such as five or 10 years, are being developed. This could also include payments being made in monthly or quarterly instalments. An affordability test to support people who might need to pay their bill over a longer term is also being considered.
The Minister would like to be clear that it would not be fair to islanders or financially responsible for the Government to write off the Prior Year Basis tax liability for 2019 of £320 million. Such a move would effectively allow two thirds of taxpayers to not pay tax on a year of their income, whilst those former Prior Year Basis taxpayers who have already paid off their Prior Year Basis liability and Current Year Basis taxpayers would not be given the same treatment. Particularly in light of the additional COVID-19 related costs the Government has had to meet over the last few months, such a proposal is not deemed responsible
Islanders can provide their feedback on the PYB reform proposal and the payment options for the frozen 2019 tax bill in a survey at gov.je/TaxReform.
As it has now passed 5,000 signatures, the petition will be considered for debate in the States Assembly, although the reform proposal is due to be debated this autumn.
Minister for Treasury and Resources